Sterling hits a day high after Bank of England minutes

London - 17 November 2010

- No surprises but good news for sterling
- Bank concentrating on reducing inflationary pressures

Sterling hit a day high against the dollar in trading this morning, after Bank of England minutes showed a three way split as in the previous month. The Bank of England’s minutes from the MPC meeting on the 3 - 4 November showed that seven members voted to keep interest rates on hold at 0.5 pc, and maintain the bank’s £200 billion quantitative easing programme.

Sterling rose around 0.21% against the dollar to $1.5937 and the euro fell to a session low of 1.1781.

Mark Bolsom, Head of the UK Trading Desk at Travelex Global Business Payments commented, “Although not a huge surprise, this is good news for sterling and helped it to rise against a basket of currencies. These minutes show that the Bank of England have switched their policy bias and are concentrating on reducing inflationary pressures. With inflation sitting at 3.2% and third quarter growth surprisingly robust, further quantitative easing is surely off the menu - for now.”

Bolsom comments that the MPC continues to sit on the fence, “The Bank seems to be adopting a “wait and see” approach and are ready to adjust policy in either direction. My feeling is that they will wait until 2011 before they raise interest rates.”

Bolsom feels that the pound’s short term outlook is positive; “These minutes, coupled with the positive unemployment data that emerged today, should see sterling recover from yesterday’s fall, which came after Governor King seemed to leave the door open to further quantitative easing.”

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